The tipping point we need on the recognition of ESG, or the glaringly obvious importance of environmental, societal and governance concerns to the way in which business is conducted in 2020 and beyond, is the importance of recognising the values by which people outside the recycled space of boardrooms increasingly want to live. When a boardroom cull at global miner Rio Tinto is applauded as a victory on accountability for stakeholders after intense pressure from investors - but the exiting leadership keeps its long-term bonuses - we have a long way to go.

Rio Tinto, a FTSE 100 company and the world’s biggest producer of iron ore, announced on Friday September 11 that its CEO Jean-Sebastien Jacques and two other senior executives are leaving “by mutual agreement” with the board. This follows a furore after its decision to blow up 46,000 year old rock shelters at Juukan Gorge in Western Australia, which have strong significance and meaning for the area’s traditional Aboriginal owners. There is going to be (another) parliamentary inquiry. Despite exiting, the Rio Tinto leadership is entitled to long-term bonuses, the company said.

The company has had the legal right to demolish the sacred sites since 2013. But the following year more than 7,000 significant artefacts were discovered during a dig there. The shelters are rich in the iron ore that has fueled the Anglo-Australian company’s profits, with underlying earnings of $10 billion last year. Mr Jacques made his first comment on the demolition two weeks after it had occurred.

The corporate failure lies in the decision not to alter course despite a discovery precious to the local community, the stakeholders in a region responsible for the mines that bring around two-thirds of the multinational’s profits. This is not about balancing “competing interests”, it is an abject failure of leadership on ethical direction.

Rio Tinto missed opportunities to alter its extraction plans following archaeological digs in both 2014 and 2018. Its CEO told a parliamentary inquiry into the blast that he was unaware of the cultural significance of the rock shelter, and he hadn’t read the archaeological report. Under his watch over four years, Rio Tinto has handed out almost $40 billion of cash to shareholders through dividends and share buybacks. The CEO’s ability to make money has been applauded by shareholders on both sides of the Atlantic as he cut costs and embarked on corporate restructuring.

As part of that restructuring, the community and social performance division within Rio was placed under the corporate relations department. Some shareholders expressed concerns reflected in media coverage, but did more not see a red flag ?

When former Australian Prime Minister Kevin Rudd said the global mIner would soon be known as RIOTNT, he was doubtless referring to the fact that all the PR in the world was going to find it hard to gloss over this egregious disregard for someone else’s culture and concerns.

The Rio Tinto board review found “no single root cause or error that directly resulted in the destruction of the rockshelters. It was the result of a series of decisions, actions and omissions over an extended period of time, underpinned by flaws in systems, data sharing, engagement within the company and with the PKKP, and poor decision-making.” PKKP refers to the Puutu Kunti Kurrama and Pinikura indigenous people.

In his statement on the board review, Simon Thompson, chairman of Rio Tinto, said : “It is clear that no single individual or error was responsible for the destruction of the Juukan rockshelters, but there were numerous missed opportunities over almost a decade and the company failed to uphold one of Rio Tinto’s core values – respect for local communities and for their heritage. “ Almost a decade ?

You might be forgiven for thinking that Rio Tinto is giving a fine demonstration of how to blow up your own reputation. But the corporate spin machine is hard at work as we get reports in the business media highlighting the CEO’s efforts to travel to try and arrange meetings with indigenous groups including the traditional owners of Juukan Gorge.” Apparently, “because of the state’s tough coronavirus legislations, he was forced to spend two weeks in a Perth hotel room, according to people with knowledge of the situation.” (FT). He has also been reported as “enduring” that period of quarantine, presumably as it’s a noble cause. In fact, he was just following Covid rule of law - and it was probably very inconvenient. But we really cannot applaud corporate leadership for following rules that are designed and intended apply to everyone, even if it makes it a little harder to function.

The fall-out from the story is ongoing, with calls for the next CEO of Rio Tinto to be an Australian, arguably more connected with local communities and the country where it generates the bulk of its profits. But Rio is headquartered in London, and 70% of its shares are held by investors based overseas.

It is an excellent example of the need for stakeholder governance, covered recently on Board Talk in response to a paper published by the Harvard Law School Forum On Corporate Governance on the anniversary of the mission statement from the Business Round Table. It was subsequently kindly re-posted by them on the Forum to help generate further debate.

Rio Tinto’s statement on executive changes mentions the departure of Simone Niven as head of Corporate Relations. It adds: “as previously announced, Rio Tinto is establishing a new Social Performance assurance function, reporting to Mark Davies, Group Executive, HSE, Technical and Projects, to strengthen oversight of communities and heritage practices and performance within the operations. In order to enhance Board engagement in Australia, Simon McKeon, non-executive director, is appointed Senior Independent Director, Rio Tinto Limited with immediate effect. This newly created Board role will complement the existing Senior Independent Director role, which will continue to be performed by Sam Laidlaw for Rio Tinto plc. “

So does this mean there has until now been no inbuilt process at Rio Tinto for board level engagement with stakeholders in a critically profitable region ? Sam Laidlaw , SID, is also chair of the remuneration committee.

The Rio Tinto debacle is sparking more media comment on stakeholder capitalism, and there is a tendency to persist in calling it “cuddly,” or “kinder”, or “gentler”, all words we tend historically to associate with women. It may be that it’s none, or bits of all of those things. It’s just capitalism better connected with the source of its business which means a broader - and more diverse - stakeholder base. But in 2020, as we increasingly call out the weaknesses of historically ‘male’ leadership, we shoot ourselves in the foot on diversity when we use ‘gentle’ and ‘kind’ as terms intended to be pejorative to undermine business direction. Perhaps this is generational, as I can’t see such arguments resonating with a millennial generation and beyond.

Empathy is increasingly necessary in a fast-connected world of social media, and to have empathy you have to listen well beyond the confines of a boardroom.

Just to end with a quick glance at the Rio Tinto board. It looks like it has gender diversity, at least - until you learn that of those four women, three are appointments just made - in 2020. Let’s watch and see what happens next at Rio Tinto.

Main Image credit : Dion Beetson on Unsplash